Western Geophysical Co. of Amer. v. Bolt Associates, Inc.

• Decision Date: 04 March 1971
• Docket Number: Docket 71-1061.
• Citation: 440 F.2d 765
• Parties: WESTERN GEOPHYSICAL COMPANY OF AMERICA, INC., Plaintiff-Appellee, v. BOLT ASSOCIATES, INC., Defendant-Appellant. BOLT ASSOCIATES, INC., Third-Party-Plaintiff-Appellant, v. LITTON INDUSTRIES, INC., Third-Party-Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

440 F.2d 765 (1971)

WESTERN GEOPHYSICAL COMPANY OF AMERICA, INC., Plaintiff-Appellee, v. BOLT ASSOCIATES, INC., Defendant-Appellant.

BOLT ASSOCIATES, INC., Third-Party-Plaintiff-Appellant, v. LITTON INDUSTRIES, INC., Third-Party-Defendant-Appellee.

Docket 71-1061.

United States Court of Appeals, Second Circuit.

Motion Argued February 8, 1971.

Decided March 4, 1971.

Roland T. Bryan, Stamford, Conn. (Bryan, Parmelee, Johnson & Bollinger, Haynes N. Johnson and Prescott W. May, Stamford, Conn., and Joseph L. Lazaroff, Boston, Mass., of counsel), for defendant.

Shaun S. Sullivan, New Haven, Conn. (Wiggin & Dana, William J. Doyle, New Haven, Conn., of counsel), for plaintiff and third party defendant.

Before WATERMAN and FRIENDLY, Circuit Judges, and McLEAN, District Judge.^*

FRIENDLY, Circuit Judge:

Plaintiff, Western Geophysical Company of America, Inc. ("Geophysical"), and its parent, Litton Industries, Inc. ("Litton"), third party defendant, move to dismiss an appeal by defendant-third party plaintiff, Bolt Associates, Inc. ("Bolt"), from an interlocutory order of Judge Blumenfeld in the District Court for Connecticut.

The original complaint, filed in March 1967, asserted two causes of action.¹ They arose out of alleged breaches by Bolt of two agreements dated September 14, 1962, and April 16, 1963, respectively. By virtue of the September 14 agreement and three $2,500 payments made pursuant thereto, Geophysical was given the option, upon further payments of $25,000, to enter into two exclusive licensing agreements with Bolt. The first, entered into on April 16, 1963 with a concurrent payment of $25,000, gave Geophysical the exclusive right "to use, as a sound source for off-shore sub-bottom exploration, certain pneumatic acoustical repeater devices having a pressure chamber volume in the size range from ten to two hundred cubic inches." The second exclusive license was to relate "to any improvements, designs, or developments and inventions relating to pneumatic acoustical repeater devices having a pressure chamber volume greater than 200 cubic inches or to fueled pneumatic acoustical repeaters for use as a sound source for off-shore sub-botton exploration." Broadly speaking, royalty income generated by Geophysical's sublicensing activities and imputed royalty income from Geophysical's own use of the devices was to be shared on a 50-50 basis.

The first cause of action alleged that, without informing Geophysical that it had made any improvements in the size range greater than 200 cubic inches, Bolt had sold or leased such devices to others, had represented that it was prepared to grant licenses to others covering devices within the terms of the second license option, and had refused to enter into the second exclusive license agreement with Geophysical. The second cause of action asserted that Bolt had wrongfully terminated the exclusive license agreement of April 16, 1963, and had sold or leased devices subject to that agreement to others. Alleging that its remedies at law were inadequate due to the uniqueness of the devices, Geophysical sought orders decreeing that the basic agreement of September 14, 1962, and the exclusive license of April 16, 1963, were in full force and effect, enjoining Bolt from granting any rights in derogation of Geophysical's rights under the latter, directing Bolt to enter into the second exclusive license, requiring specific performance of the two agreements in many respects unnecessary to detail, and directing an accounting for profits realized by Bolt's alleged breaches of contract or awarding "as an alternative to the relief above requested, damages in the amount of $950,000.00."

Bolt filed an answer presenting various defenses and also five counterclaims against Geophysical and Litton. The second, third and fourth counterclaims relied on the antitrust laws. The second counterclaim asserted that the actions of Geophysical and Litton were an attempt to monopolize and a combination and conspiracy forbidden by § 2 of the Sherman Act and that their acquisition of exclusive rights to Bolt's unique and novel invention would violate § 7 of the Clayton Act. The third and fourth counterclaims alleged a conspiracy for a group boycott of Bolt and to suppress use of Bolt's invention, in violation of § 2 of the Sherman Act. In these counterclaims Bolt asked, inter alia, that the court declare the agreements unenforceable, enjoin Geophysical and Litton from attempting to enforce them or from engaging in unlicensed use of Bolt's devices, and award Bolt damages of $1,000,000.00, to be trebled. Similar alleged violations of the antitrust laws were also included in Bolt's defenses.

Geophysical and Litton moved for judgment on the pleadings and for summary judgment with respect to the antitrust defenses and counterclaims. The court denied the motions insofar as the defenses were concerned, with leave to the parties to submit additional affidavits in respect of the counterclaims, see 305 F.Supp. 1248 (D.Conn.1969). In a later opinion, 305 F.Supp. 1251 (D. Conn.1969), the court adhered to its ruling with respect to the Sherman Act defenses and also upheld the third and fourth counterclaims. It reached a different conclusion with respect to the claimed violation of § 7 of the Clayton Act. Assuming in Bolt's favor that "a single acquisition of an exclusive license is within the purview of the act," it ruled that Geophysical's obligation to promote worldwide licensing made the license itself pro-competitive and that any suppression of the invention by Geophysical and Litton would stem not from the acquisition of the asset, to which § 7 is directed, but from breach of contract and misuse of an asset already acquired. The court summarized its conclusion as follows, 305 F.Supp. at 1256:

The motions of plaintiff and third-party defendant for summary judgment with respect to defendant\'s counterclaims three and four are denied. With respect to that part of counterclaim number two which invokes Clayton Act Section 7, the motions are granted; with respect to the rest of counterclaim number two (that part invoking Sherman Act Section 2), the motions are denied.²

After various unsuccessful maneuvers by Bolt designed to produce an order appealable by virtue of F.R.Civ.P. 54(b) or 28 U.S.C. § 1292(b), which need not be here detailed, and an order by the judge separating for later trial the patent issues raised by the fifth counterclaim, 50 F.R.D. 193 (D.Conn.1970), Geophysical, with leave of the court and the defendant's consent, served an amended complaint. Although Bolt conclusorily asserts that this constituted a material change, it does not appear to us to be so. Bolt answered, as required by F.R.Civ.P. 15(a). For our purposes the important change in the answer to the amended complaint was the addition of a sixth counterclaim. This alleged a plan by Geophysical in conjunction with Litton "to continue and further plaintiff's dominance of the off-shore, sub-bottom exploration industry by seeking to control and controlling the new significant non-dynamite sound sources, to suppress their use, and to keep them" from the rest of the industry. After developing this theme in detail, Bolt alleged that the plan and the actions pursuant thereto violated §§ 1 and 2 of the Sherman Act and § 7 of the Clayton Act and prayed for damages of $1,000,000, to be trebled, and an injunction against plaintiffs' attempting to enforce any of the rights they claimed under the agreements and against their pursuing various courses of action which would have anticompetitive effects. Finally, Bolt sought a direction that plaintiffs be required to divest themselves of all rights in non-dynamite sound sources. In contrast to the original answer, the amended one demanded "trial by jury of all the issues in this action that are properly triable by a jury."

Geophysical and Litton responded with a motion which, so far as is here pertinent, sought to strike the jury demand as not having been served within the time required by F.R.Civ.P. 38(b) and all defenses and counterclaims based on § 7 of the Clayton Act "on the ground that this Court has already ruled that such defenses and counterclaims are insufficient as a matter of law." Judge Blumenfeld disposed of this motion and dealt with other matters in a pre-trial order filed December 29, 1970. Holding that nothing in the amended complaint furnished a basis for the late jury demand, he granted the motion to strike that demand insofar as it related to issues presented by the amended complaint and, inferentially, by the first five counterclaims. On the other hand, he denied the motion insofar as it sought to strike the jury demand with respect to issues raised by the newly pleaded sixth counterclaim. Faced with the prospect of a non-jury trial on the issues raised by the amended complaint and the first five counterclaims and of a jury trial on the issues raised by the sixth, and recognizing the need for additional, perhaps extensive, discovery with respect to the latter, he deferred discovery and trial of the sixth counterclaim until trial of the other non-patent claims and counterclaims had been completed. While he in form denied the motion "to strike the Clayton Act § 7 pleadings," he stated that "this court's previous rulings relating to the defendant's answer insofar as it asserted defenses and/or counterclaims based upon alleged violations of the Clayton Act § 7 (15 U.S.C. § 18), 305 F.Supp. 1248, 1251 (D.Conn.1969), are equally applicable to the defendant's amended answer." Trial was to commence on March 9, 1971. Bolt's notice of appeal states generally that it is "from the Court's Order ruling on plaintiff's Motion to Strike, entered in this action on December 29, 1970."

To take the easiest point first, it is altogether plain that the striking of Bolt's jury demand with respect to the amended complaint and the repleaded counterclaims as untimely was neither a "final...